President Elizabeth Warren: remaking capitalism

For the past generation, Democratic presidential candidates have mostly talked of redistributing the rewards of American capitalism while leaving its basic structure intact.

Elizabeth Warren promises to break that mold. The Massachusetts senator, who has moved to the front ranks of the field, talks of remaking capitalism from the ground up. As president, she would drastically cut back the size and influence of big business, push private companies from parts of the economy altogether, and shift power to government and to labor.

Businesses are meeting the rising prospect of a Warren presidency with a combination of concern, skepticism and, for a few, a sense of opportunity.

Companies are used to Democrats criticizing business, whether John Kerry, the 2004 nominee, for outsourcing jobs or President Obama, for causing the financial crisis. But no front-runner has issued so comprehensive an indictment as Ms. Warren, who has blamed business for, among other things stagnant wages, high student debt, global warming, gun violence, the prison population, high medical bills, and the shortage of affordable housing and child care.

And no front-runner has proposed such sweeping changes to how businesses operate. A President Warren would seek to regulate big tech companies as utilities, break up big banks and split them from securities dealers, ban fracking of oil and gas, phase out carbon emission from buildings, cars and power plants in eight to 15 years, require big companies to appoint worker representatives to at least 40% of board seats, ban private health insurance and, effectively, for-profit college, and negotiate down drug prices.

Her policies would directly affect companies with sales of nearly $5 trillion and stock-market value of more than $8 trillion, a third of the S&P 500 stock index. Taxes on the wealthy and corporations would rise sharply.

That, in turn, has led to nervousness among some executives. “She could create an environment where it is next to impossible to function” for health insurers, said Vicky Gregg, a former chief executive of BlueCross BlueShield of Tennessee and now partner in a private-equity firm. “There’s no question that keeps you up at night if you’re a health-plan executive.”

Others, particularly in Silicon Valley, are enthusiastic supporters of Ms. Warren despite, or for some because of, her plans to break up big tech companies. Some economists predict her plans could boost growth and that business warnings about the harm of her policies should be taken with a grain of salt.

“Businesses have cried wolf far too many times for that to be taken at face value during a presidential campaign,” said Austan Goolsbee, a University of Chicago economist who served under Mr. Obama.

When Ms. Warren first proposed companies should be responsible to all stakeholders, not just shareholders, some called it socialism, he noted. A year later, “the Business Roundtable announced something very much in the spirit of what Elizabeth Warren said.”

Some executives express the hope that her plans are so disruptive she would need to water them down significantly. A fracking ban “would decimate our industry,” said Scott Sheffield, CEO of Pioneer Natural Resources Co., one of the largest U.S. shale companies. “We understand candidates for the presidential nomination often run to the extremes during the campaign and moderate their positions once they are responsible for governing.”

Still, there is no sign of such moderation from Ms. Warren, and political analysts warn not to expect any: Presidential candidates of late, including Donald Trump, have governed much as they campaigned.

By arguing that the growth of corporate power over the last 35 years is at the root of many problems in the U.S., she would make the place of business in society a central theme of the election.

Ms. Warren, in laying out her case, has said she is “a capitalist to my bones,” whereas fellow candidate Sen. Bernie Sanders calls himself a “democratic socialist.”

“I love what markets can do, I love what functioning economies can do. They are what make us rich, they are what create opportunity,” Ms. Warren said on CNBC last year. “But only fair markets, markets with rules. Markets without rules is about the rich take it all, it’s about the powerful get all of it. And that’s what’s gone wrong in America.”

Supporters say her proposals wouldn’t displace capitalism but align it with the what prevailed in the 1950s and 1960s and still does in many other Western countries.

Ms. Warren would impose a 2% to 3% tax on wealth above $50 million, repeal President Trump’s tax cuts for corporations and the wealthy, impose a new 7% tax on big company profits and a 14.8% tax on incomes above $250,000 to finance expanded Social Security benefits.

Many economists say high tax rates discourage investment and work, and thus slow economic growth. Gabriel Zucman, a professor of economics at the University of California, Berkeley who advised Ms. Warren on the wealth tax, said it depends on how the money is spent. “If it’s spent on child care, and that increases women’s labor force participation, then you get an increase in income for part of the population.” He noted the wealthy paid 91% rates on incomes and 77% on estates in the 1950s and 1960s and “there’s no evidence it killed innovation or growth.”

Mark Zandi, economist at Moody’s Analytics, wrote in a series of reports that the taxes required to pay for Ms. Warren’s proposals would damp investment and work by the wealthy, but that effect would also be more than offset by increased spending by lower-income people, such as child-care workers.

Supporters note almost every advanced capitalist economy has single-payer health care, and in Germany, big companies have worker representatives on their boards. “It has not killed German capitalism,” said Mr. Zucman. “They have some pretty strong corporations.”

If each Warren proposal has some precedent in U.S. or foreign experience, in its totality her program would be a sharp break with capitalism as American companies know it.

A senior executive at a Washington-based trade group who works closely with top CEOs said of the distinction often drawn between Ms. Warren’s capitalism and Mr. Sanders’ socialism: “I don’t know if business is buying that distinction. From a policy standpoint there doesn’t seem to be a great deal of difference.” (Mr. Sanders sought the nomination in 2016 but unlike Ms. Warren now, never led the Real Clear Politics polling average or online prediction markets.)

A common refrain among business is that Ms. Warren seems to thrive on attacking them, indeed considers it part of her brand. She retweets articles about their criticism with: “I approve this message.”

The rancor is most acute among financiers Ms. Warren regularly casts as villains, even after a decade of postcrisis reforms that have made banks safer, less profitable and their treatment of consumers more tightly regulated. She called her capital-gains-tax proposal, introduced this summer, the Stop Wall Street Looting Act. Some still stew over her blocking investment banker Antonio Weiss from a Treasury job under Mr. Obama in 2015, despite his Democratic credentials, because he worked on deals that moved some companies’ domiciles abroad.

Few, however, will say so publicly, fearful of the damage she can do to their companies and share prices. Two weeks ago, she knocked 3% off the shares of the two big bond-rating agencies by challenging the impartiality of their ratings in a letter to regulators. When the chief executive of UnitedHealth Group Inc., parent of the country’s largest health insurer, briefly addressed the impact of Medicare for All in an earnings call, it was blamed for driving down the entire sector’s share prices.

UnitedHealth says it “welcomes the renewed national discussion on how to achieve universal coverage.”

In July, Facebook Inc. CEO Mark Zuckerberg, referring to Ms. Warren’s plan to break up Facebook, said in remarks to employees reported by The Verge, a technology-news site: “If she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge,” adding that “at the end of the day, if someone’s going to try to threaten something that existential, you go to the mat and you fight.”

Ms. Warren shot back on Twitter that Facebook has “a lot of power—and [faces] little competition or accountability.”

Last week, Mr. Zuckerberg held another employee Q&A, which was publicly livestreamed. Asked about Ms. Warren’s plans and how Facebook’s platform would remain unbiased toward her, he joked he would “try not to antagonize her further,” then added employees needed to be neutral and empathetic to a wide range of opinions. “The value that we care about is giving people a voice and allowing people to express themselves,” he said. “We obviously try not to be biased.”

The consensus among business leaders is that few of Ms. Warren’s big initiatives will be enacted, because she will tack toward the center if she secures the nomination or the White House, or because Congress and the courts won’t let her. An antitrust lawsuit against a big tech company would take a decade or longer and probably fail, Barclays analysts said in a July note.

Medicare for All “would destroy” private insurers, said Matthew Borsch, an analyst with BMO Capital Markets. But, he said, an executive of a major health insurer, in a recent private meeting, put the odds of such a plan passing at “10,000 to one.”

Many business leaders have no problem with Ms. Warren’s goals, but do with the speed and means by which she means to reach them. Minneapolis-based electric utility Xcel Energy, which serves eight states, in December pledged to slash its carbon emissions 80% by 2030 and 100% 2050. That’s not good enough for Ms. Warren, who has targeted 100% by 2035.

The problem, said CEO Ben Fowke, is that getting from 80% to 100% depends on as-yet-unproven advances in storage, carbon capture, and nuclear and hydrogen generation. Ms. Warren “would set up some unrealistic expectations.”

Automobile manufacturers are rolling out electric models, but none has yet found a way to make such a car affordable to mainstream consumers and profitable. “The current market is 1% electric vehicles. All of those, 100%, are sold at a loss. The industry isn’t here as a non-profit,” said one auto executive. The economics will improve, yet Ms. Warren’s plan to make all new cars emissions-free by 2030 “is, simply put, preposterous.”

The Trump administration is already mulling action on drug prices. Ms. Warren would go much further, letting Medicare negotiate prices with suppliers, permitting imports of cheaper foreign medicines and having the federal government manufacture scarce generics.

Ron Cohen, CEO of biotech drugmaker Acorda Therapeutics said there are legitimate concerns about drug costs and some price increases have been excessive. But her proposals won’t work, he said: Patients could lose access to vital drugs if Medicare and manufacturers can’t agree on a price, and it would be more efficient for the federal government to offer existing manufacturers incentives such as tax breaks to make scarce generics.

Ms. Warren’s sympathizers aren’t surprised by the blowback. They see big-company CEOs as preoccupied with their own welfare rather than that of the economy as a whole. Small banks, they argue, would benefit from breaking up big banks, and startup technology companies would benefit from breaking the grip of big tech companies on internet search, social media and e-commerce.

“Breaking up big tech is pro-growth and pro-innovation,” said Bharat Ramamurti, who heads Ms. Warren’s economic policy team. “In the 90s, Microsoft was threatening to corner the internet via Internet Explorer and Windows, and federal government antitrust action helped pave the way for companies like Google and Facebook to emerge in the first place. And now Google and Facebook dominate that space, and smaller tech companies are run out of business or snapped up—undermining innovation and dynamism.”

Some private analysts agree: “If Warren does break up the big tech giants, we will see more competitors and innovation,” said Jonathan Tepper, head of a financial markets advisory firm Variant Perception, who has been critical of the companies. “The telecoms and tech boom happened after AT&T no longer had a stranglehold on U.S. telecoms. Likewise, breaking IBM’s hold of hardware and software led to the software boom of the 1980s and 1990s.”

Ms. Warren does draw business support, in particular in Silicon Valley, because some agree with her plans for business, don’t think they’ll happen or simply consider the rest of her agenda more important. Venture capitalist and liberal donor Chris Sacca called her wealth tax “*extremely* and *radically*... reasonable” on Twitter.

In June, venture capitalist and former Facebook executive Chamath Palihapitiya tweeted: “I don’t agree with many of her proposals but I donated to Elizabeth Warren because SHE IS THE ONLY MAJOR CANDIDATE WITH STUFF WRITTEN DOWN.” In an email, Mr. Palihapitiya predicted big tech wouldn’t ultimately be one of the issues Ms. Warren prioritizes.

In response to concerns that phasing out fossil fuels would kill jobs, Ms. Warren has said her green energy and climate adaptation plans will create millions of even better paying jobs.

Businesses have a history of adapting to, and ultimately profiting from, expanded government. Accountants vehemently opposed being regulated under the 2002 Sarbanes-Oxley Act, then made a fortune advising companies on the law’s provisions, notes one former Democratic staffer who worked on the law.

Some health-insurance executives hope Ms. Warren’s push for Medicare for All will fall short and, to win over moderate legislators, she will instead expand coverage in a way that would bring them more customers—as Mr. Obama’s Affordable Care Act did.

And for many business leaders, Mr. Trump, given his attacks on free trade, immigration and companies that cross him, isn’t an overly appetizing alternative. Thus, uneasy as they at the prospect of a Warren presidency, few would act actively work to re-elect Mr. Trump, the Washington trade executive speculated.

Green New Deal

Representative Alexandria Ocasio-Cortez released a sweeping package of environmental measures Thursday that has pitted progressives in the House Democratic caucus against moderates over how far to go in pursuit of resetting the climate change debate.

The proposals, which have come to be known as the Green New Deal, were crafted in conjunction with Senator Ed Markey of Massachusetts. Their plan envisions shifting away from fossil fuels and other sources of emissions that cause global warming within 10 years.

It also calls for moving away from nuclear power, according to a fact sheet on the plan distributed by Ocasio-Cortez’s office, which some climate activists favor as a carbon-free energy source.

“Even the solutions that we have considered big and bold are nowhere near the scale of the actual problem that climate change presents to us, our country, our world,” Ocasio-Cortez said on NPR’s Morning Edition. “No one has actually scoped out what that larger solution would entail. And so that’s really what we’re trying to accomplish with the Green New Deal.”

The plan has already gathered 60 co-sponsors in the House and has prompted strong opposition from Republicans and industry leaders who say it’s technologically impossible and will costs tens of trillions of dollars.

(no longer) poles apart

Unnecessary utility poles are all over Hawaii because two companies that share most of them often disagree about their responsibilities. Now that problem has been resolved.

In a move that will eliminate 14,000 unsightly poles, Hawaiian Telcom agreed to let Hawaiian Electric Cos. have sole ownership of about 120,000 utility poles on Oahu, Hawaii island, Maui, Molokai and Lanai.

The agreement ends nearly a century of joint pole ownership between the electrical utility and its longtime partner that was once just a phone company.

Under the new arrangement, Hawaiian Telcom will lease pole space for its telephone, internet and TV transmission lines. In return, Hawaiian Electric will provide Hawaiian Telcom with a $48 million credit, though $26 million of that covers disputed past costs of jointly owning poles.

John Komeiji, Hawaiian Telcom president and general manager, called the deal a win for both companies and the state.

“With this change, Hawaiian Telcom joins many other communications providers that lease space on poles, enabling us to channel more of our resources toward investment in fiber and expansion of next generation services statewide,” he said in a statement.

Sharing utility pole ownership historically was done to minimize the number of poles in communities and reduce expenses for companies that needed such infrastructure. On Oahu, joint pole ownership dated to 1922 with Hawaiian Electric, Mutual Telephone Co. and streetcar operator Honolulu Rapid Transit Co., according to Hawaiian Electric.

In more modern times, however, joint pole ownership was a source of discord for Hawaiian Electric and Hawaiian Telcom. Problems included how much Hawaiian Telcom should pay for new poles or even whether new poles were necessary.

As a result, sometimes two poles carried lines when only one was necessary. This occurred in cases where Hawaiian Telcom disagreed over the need for a new pole. Hawaiian Electric would install a new pole for its use and cut off the top of the adjacent old pole where its lines used to hang, while Hawaiian Telcom kept its equipment on the old pole.

The two companies figure 14,000 such “double poles” exist. The agreement calls for these old poles kept by Hawaiian Telcom to be removed within 10 years, with Hawaiian Telcom paying $650,000 a year for the work.

HECO planning to be 100% renewable by 2040

Hawaiian Electric Co. expects there will be 165,000 private solar systems operating by 2030 across HECO’s territories, up from 79,000 now, the utility said today.

HECO submitted the fourth version of its plans on how it will get the state to 100 percent renewable energy dependence today. The steps include adding utility-scale solar, customer sited-batteries and rooftop solar, wind and biofuels.

HECO said it expects 42 percent of homes in its territories to have rooftop solar by 2030.

By 2020 HECO said renewables would make up 48 percent of the power mix — more than 15 percent of that coming from customer-sited renewables.

HECO said, in the next five years, it plans to add 360 megawatts of utility scale solar, 157 megawatts of utility scale wind and 115 megawatts from demand response programs, which encourage customers to use electricity when more renewable energy is on the grid.

HECO said Molokai would reach 100 percent by 2020.

That year, the Big Island is expected to hit 80 percent renewable, Maui 63 percent, Lanai 59 percent. Oahu would reach 40 percent by 2020.

HECO’s portfolio will be 72 percent renewable by the end of 2030, according to the plan. The law calls for 40 percent in 2030.

HECO said it will achieve 100 percent five years prior to the 2045 deadline.

The electricity utility said it plans to get to 100 percent by the end of 2040, when the law requires 70 percent.

Hawaiian Electric to be sold (or not)

*** [7/18/16]

NextEra Energy Inc. has ended its plan to buy Hawaiian Electric Industries Inc. and will pay the state’s largest utility $95 million in “break-up” fees and other costs, the two companies announced early today.

The announcement came after the state Public Utilities Commission, in a 2-0 vote Friday, rejected the Juno, Fla.-based company’s $4.3 billion offer to takeover HEI. PUC approval was needed for the companies to close the deal. NextEra and HEI could have challenged the PUC decision, but instead will walk away from the deal.

“As a result of the PUC’s order, we have terminated our merger agreement,” Jim Robo, NextEra’s chairman and chief executive, said in a news release issued before U.S. stock markets opened this morning. “We wish Hawaiian Electric the best as it serves the current and future energy needs of Hawaii, including helping the state meet its goal of 100 percent renewable energy by 2045.”

The PUC, in its rejection, expressed doubts about NextEra’s commitment to the state’s lofty renewable-energy goal and said its decision does not prevent Hawaiian Electric from seeking another partner.

[12/3/14] Juno Beach, Fla.-based NextEra Energy has agreed to buy Hawaiian Electric Industries in a $4.3 billion deal.

HEI will spin off American Savings Bank as part of the deal.

The companies said Wednesday that Hawaiian Electric Co. will keep its name and continue to be based in Honolulu. There will be "no involuntary workforce reductions at Hawaiian Electric Co. for at least two years after transaction closes," the companies said in a news release.

The value to HEI shareholders is estimated to be $33.50 a share. HEI shares closed trading Wednesday at $28.19.

"This is a transformational opportunity to unlock the value of two strong, local companies, American Savings Bank and Hawaiian Electric," said Connie Lau, HEI's president and chief executive officer and chairman of the boards of American Savings and Hawaiian Electric. "In NextEra Energy, Hawaiian Electric is gaining a trusted partner that can help the company accelerate its plans to achieve the clean energy future we all want for Hawaii."

Lau said that with NextEra's additional financial resources Hawaiian Electric will be able to meet its goal of reducing Hawaii's dependency on fossil fuels sooner.

the end of rooftop solar?

Hawaii’s rooftop solar industry, already struggling with a recent reduction in an incentive program,could come to a standstill next year.

Last month, with little fanfare, the state Public Utilities Commission announced it will cap new residential and commercial solar projects at 25 megawatts or about 4,500 new systems on Oahu.It’s likely the cap will be met by the middle of next year, if not sooner. Once it is met, no additional rooftop solar systems will be approved for connection to the grid.

The PUC decided to halt new rooftop solar installations to prevent damage to the grid and allow other renewable energy sources — such as wind and geothermal — to catch up with residential solar.
The cap puts in jeopardy an industry that has grown to 115 companies with 2,200 employees,according to the Solar Energy Industry Association’s count as of September.

“It will be gone in 2016,” said Chris DeBone, managing partner at Hawaii Energy Connection, who expects the cap to be met by May or June.

PUC Chairman Randy Iwase said the cap was necessary because Hawaii needs a variety of renewable energy resources to achieve its goal of 100 percent renewable electric power by 2045,and that problems with HECO’s old grid leave little space for all resources to connect.

Hawaiian Electric Co. has connected 51,000 rooftop solar systems, or 272 megawatts, to its Oahu grid. So far this year, HECO has approved more than 9,700 solar system applications, or about 58 megawatts worth of power, for Oahu.

Representatives from the solar industry said the cap leaves room for4,000 to 5,000 additional systems. The number would be lower if commercial systems are included.

Roy Skaggs, project developer at Alternate Energy Inc., said the limit will be met by summer. “It’s not long,” he said.

Drew Bradley, director of business development at REC Solar, said it would be met within months.

“From the time it was announced to the time it is fully subscribed, it is not more than three to six months, if that,” Bradley said.

Colin Yost, principal at RevoluSun, said he could see the solar industry hitting the limit as soon as March.

The 25-megawatt cap on solar was part of the PUC’s Oct. 12 order that roughly cut in half the credit rooftop solar owners get for power sent into the grid, and raised the minimum monthly bill for solar customers to $25.

The cap applies to applications for exporting systems that were submitted on or after Oct. 14.

After the cap is reached, HECO customers will still be able to add solar to their house but will not be able to send power to the grid. They will be able to take power from the grid when needed. Customers looking to install solar will either need to curtail the excess energy their systems produce or get a battery to prevent their excess solar energy from being sent to the grid.

“Once grid supply is gone or the cap has been met, then energy storage or energy management is going to be a necessity, not an option,” DeBone said.

Yost, of RevoluSun, said the order was made with bad timing because batteries are too expensive for the average person, noting there is no state tax incentive for batteries and that a 30 percent federal tax credit will sunset at the end of 2016.

Iwase said the “initial” cap will be revisited in a year and a half.

“Nothing is set in stone,” Iwase said. “We realize there has to be modernization of the grid to accommodate PVs and other things. We are hoping, anticipating that we will be prepared to face a Phase 2 decision at that time.”

Iwase said the PUC is also pushing the utility to modernize the grid. The PUC ordered HECO to improve the utility’s “Power Supply Improvement Plan” earlier this month. The plan includes a timelinefor retiring fossil fuel plants, using new technology such as energy storage and adding a diverse portfolio of low-cost renewables.

“Everything has to evolve,” Iwase said. “We have to evolve on the grid. We have to evolve on the kinds of programs and initiatives if we are going to achieve 100 percent renewable.”
Iwase said rooftop solar is not the only option, but just one component of the state’s 100 percent renewable plan.

“Is it important? Yes, it is,” he said. “So is battery storage residential, battery storage utility grade and time of use (different electric rates for different times of day).”

Iwase said he wanted to see more community solar, community wind farms, utility-scale battery storage, hydrogen fuel cells and geothermal development.

Hawaiian Electric and solar

[5/12/15] Oahu's rooftop solar industry returned to growth in the past two months after two years of declines.

"The drought has broken, and the rain has started to fall," said Marco Man­gels­dorf, who tracks rooftop solar permits and is president of Hilo-based ProVision Solar. "It comes as a very welcome relief to Oahu PV (photovoltaic) businesses."

The number of rooftop photovoltaic permits issued in April by the City and County of Hono­lulu was up 28 percent from the same month last year. The city issued 742 permits in April, up from 577 in April 2014, Man­gels­dorf said Monday.

"Despite all the continued carping by some in the industry," the increase in permits is most likely due to Hawaiian Electric Co. approving more systems, Man­gels­dorf said. The utility is "going to where no utility on the mainland has gone before as far as circuit penetration levels of solar PV. "

HECO has said 12 percent of its customers on Oahu have rooftop solar, far more than any mainland utility.

Mangelsdorf reported last month that 610 PV permits were issued on Oahu in March. Monday he revised that number to 664, making March the first month solar permits issued went up year-over-year after 23 months of declines.

The Oahu utility has been busy approving solar systems since promising last year to clear a backlog of 2,749 systems waiting for HECO approval in October.

HECO said in an April 2 filing with the Public Utilities Commission that as of the end of March, it had approved 2,543 of the pending Oahu applications.

The solar industry took a hit when HECO announced in 2013 that all rooftop solar systems needed HECO approval before being connected to the grid. Applications started piling up after HECO was slow to approve systems in areas that already had a large number of rooftop systems. HECO said the delay was due to concerns about safety and the stability of the grid if more solar was added in those areas.

HECO said it is working on technical solutions to issues that have stalled approvals in the past.

"We know how important an option rooftop PV is for our customers, and we're continuing to perform the necessary technical reviews and proc­ess rooftop solar applications as quickly as possible," Darren Pai, HECO spokes­man, said in an email Monday. "We're also working on technical solutions and upgrades so more customers can get the benefits of rooftop PV in a way that ensures safe, reliable electric service."

Despite the number of permits issued in April, representatives of the solar industry said they do not see the increase turning the industry around.

"We were very happy to see that the queue was cleared, and businesses had some work to keep them going," said Leslie Cole-Brooks, executive director of the Hawaii Solar Energy Association. "But we are still on a long ride on the ‘solar-coaster.' With the exception of the work that has come from clearing the queue, interconnection will continue to be limited until we have updated interconnection rules in place or see massive grid defection."Roy Skaggs, project developer at Alternate Energy, said he was not hopeful about future months, noting that customers in areas with high numbers of solar connections to the grid are waiting for approval, similar to those who had pending applications in October.

"While it is good news to see permits up for the first time in two years, it is not something to get too excited about," Skaggs said. "This is just a reaction to HECO finally clearing the queue from October."

Mangelsdorf said he does not believe the growth will last long.

"How much (solar) the grid of today can accommodate still remains an open question," Man­gels­dorf said.

[2/20/15] Solar industry representatives said Thursday they blame Hawaiian Electric Co. for 400 lost solar jobs in 2014.

The Alliance for Solar Choice, a solar lobbying group, said the slow utility approval for customers looking to get rooftop solar led to the loss of solar-related jobs in Hawaii.

The Solar Foundation, a national nonprofit, said earlier this month there were 2,200 solar workers in Hawaii at the end of 2014, down from 2,600 in 2013.

In September 2013 HECO changed its policy, requiring customers to be approved by the utility before installing rooftop solar. HECO has been slow to approve rooftop photovoltaic systems in neighborhoods where it said solar power has reached 120 percent capacity. In the past, HECO said exceeding 120 percent could be dangerous to homes and the grid.

[10/10/14] The state blasted Hawaiian Electric Industries' new energy transition plan for being stuck in the past and doing more to benefit the utility than the public.

"Hawaii cannot be a trailblazer in energy innovation by solving tomorrow's problems with yesterday's solutions," said the Department of Business, Economic Development and Tourism in an 86-page filing with the state Public Utilities Commission.

DBEDT registered its frustration with the utility, saying HEI is clinging to an old business model that is incapable of meeting the goal of moving Hawaii off fossil fuels and onto renewable energy.

The electric company's plan proposes "what is best for the utilities, not what is best for the public," DBEDT said.

In August, Hawaiian Electric Co., a subsidiary of HEI, filed its plan with the PUC that included a goal of generating 65 percent of the utility's power from renewable resources by 2030, tripling the amount of solar power and cutting the average bill for most customers by 20 percent.

DBEDT said it supports those targets but "is not entirely convinced that these goals go far enough."

The PUC has received hundreds of written comments on HECO's plan and will consider them as it decides whether to approve or reject all or part of the plan. A date for the PUC's decision hasn't been set.

HECO said Thursday it would not comment on the DBEDT response or any individual submission at this time.

"We welcome all kinds of comments and look forward to the discussion process that will follow," said Peter Rosegg, spokesman for HECO.

DBEDT's comments are surprising because the state usually takes a much more neutral tone, said Robert Harris, director of public policy at San Francisco-based Sunrun Inc., a solar company.

"I think it is surprising, the unanimity of those criticisms by so many of the major players," Harris said. "You essentially have every regulatory lobby in the state of Hawaii signaling deep frustration."

DBEDT criticized the HECO companies -- Hawaiian Electric on Oahu, Maui Electric, and Hawaii Electric Light on the Big Island -- for "maintaining the traditional vertically integrated model while not making significant progress on renewable penetration in the near term."

The state agency said it prefers rapid movement away from the old business model to one where HECO would get its profits from transmission and distribution of electricity but not generating power. That would allow many small players, such as rooftop solar systems or wind farms, to connect to the grid operated by HECO.

HECO's plan is not progressive enough for Hawaii's position in the renewable-energy market, DBEDT said.

HECO's proposals relating to rooftop solar focus more on how the utility makes money and not enough on how the public can benefit from these programs, DBEDT said.

HECO proposed increasing the minimum monthly payment from customers with solar systems to $71 a month, up from $17 now, and reducing the amount HECO pays for solar power sent into the grid.

"The 'problems' these revisions are intended to address relate to ensuring a certain level of revenue or profitability for the HEI companies," DBEDT said. "These revisions are asymmetrical in that they appear focused on benefiting the HEI companies without any commensurate benefit to the public."

HECO has said it must slow down the addition of more rooftop solar systems because they might cause instability in the grid.

[9/20/14] Legislators scolded Hawaiian Electric Co. on Friday for slowing down the adoption of rooftop solar power systems, saying the delays could mean residents will miss out on a lucrative federal tax incentive.

There are 4,500 people waiting for solar approval as a result of a September 2013 rule change where HECO required customers and contractors to be approved by the utility before installing photovoltaic systems.

PV installation permits plunged 67 percent in August from the year-earlier period and were down more than 80 percent from the all-time monthly high in October 2012.

"This is a case where a serious tax credit that is helping our constituents throughout the islands is going to lapse," said state Rep. Cynthia Thielen (R, Kai­lua-Kane­ohe Bay).

A 30 percent federal tax credit available to HECO customers who install solar systems ends Dec. 31, 2016. There is also a state tax credit for PV system installations of 35 percent up to $5,000 per system, which doesn't have an expiration date.

HECO has said it needs to slow down the addition of more rooftop solar systems because the rapid increase in PV installations in the past few years has caused concern about the stability of the electric grid.

"You should have known two years ago that it was going to go beyond what you can take," said state Sen. Donna Mercado Kim (D, Kalihi-Moana­lua-Halawa) at a state Capitol briefing. "You should have figured that out. The more we give incentives, the more we give tax credits, the more you are going to encourage people, and that was the plan, encourage people. So I don't understand why we are here."

Jim Alberts, HECO senior vice president of customer service, responded that the company is looking for fixes but needs time.

"There is a whole series of solutions we have proposed to implement," Alberts said. "We just have to keep using that logical stepwise approach to implement customers over time. There isn't a silver bullet that just says everyone can interconnect."

Thielen asked why doesn't HECO approve solar systems that don't connect to the grid but provide power to the house where they are located.

"Why not move ahead with that, which would put people back to work? It lets the 4,500 people and more have some hope to move ahead," Thielen said.

The utility said it could approve what it calls non­export PV systems in a matter of weeks.

"We can do a test. A non­export systems is a system that exports nothing to the grid," said Alberts.

Thielen said she wanted to see data from HECO in the next three to four weeks that small-scale PV approvals are being made.

"Jim (Alberts), I'm going to hold you to that," said Thielen.

Thielen said fast-tracking solutions should be beneficial to both the customer and the utility.

"Why don't we move ahead with fast-tracking the interconnections of the photovoltaic systems that don't export and provide the ability to shift the exports on peak times? That, I understand, is technology that is available at this time," said Thielen.

Kim said she was concerned that the utility's goal for solar growth — as outlined in the energy efficiency plan that it filed with the Public Utilities Commission in August — is too conservative.

"You were talking about just a 6 percent (per year) increase when we have grown far greater than that, as you've shown. That is my problem. Nobody anticipated this growth," said Kim. "You supported tax credits. You supported us giving loans. You supported all of these programs to encourage people, encourage the industry."

Kim also questioned HECO's plan to charge a base rate of $71 a month to customers when some customers with solar systems are paying and were expecting to pay less than that.

"I'm concerned about the people who went out and took out loans based on what they were paying for their electric bill," Kim said.

"Now, all of the sudden, their bill is going to be $71," said Kim. "Had they known that ahead of time, it may not have been cost-effective for them to invest the $14,000, $15,000 in their systems."

*** [1/25/15]  Tired of seeing their sales decline because of a lengthy approval process for rooftop photovoltaic systems, Hawaii's solar companies are turning to other products and services to make up for lost revenue.

The offerings include solar water heaters, house fans, natural lighting solutions, electric vehicle charging stations, home automation and security, pool pumps and batteries.

Since September 2013, Hawaiian Electric Co. has required solar companies to get HECO's approval before installing systems, saying the safety of the electrical grid, utility workers and customers was at risk if too much power was generated in any one area.

The number of solar systems sold plummeted following the rule change. Last year 6,554 rooftop solar systems were given building permits on Oahu, down from 13,303 in 2013 and 16,715 in 2012. The total value of the permits last year was $201 million, a drop of more than half from $454 million the year before.

Kauai's electricity

While NextEra Energy's $4.3 billion bid to buy Hawaiian Electric Industries dominates the local energy debate, a group of Hawaii island residents is quietly investigating another possible future for their utility. They are turning for inspiration to Kauai, where pioneering folks banded together in a cooperative and bought their electric utility for $215 million in 2002 in a completely debt-financed deal.

"We had zero equity," recalled Dennis Esaki, who runs an engineering company and was a founding director of the nonprofit Kauai Island Utility Cooperative. "We didn't have any money. It was an amazing feat."

At first he ducked when people called about the idea of buying the electric company.

"I didn't take their phone calls," he said in an interview. "I figured they must think I got money that I don't have."

By the Numbers Kauai Island Utility Cooperative is a not-for-profit electrical co-op owned and controlled by the members it serves. >> $215 million: Cost of the utility when purchased in 2002 >> 33,000: Member-owners, who are its customers >> $80 million: Equity stake owned by members >> $30 million: Returned to members since 2002 >> 9: Elected board members Source: Kauai Island Utility Cooperative

But he decided to join the effort. The cooperative got rolling with $200,000 fronted by a Lihue businessman, Gregg Gardiner, and the support of the National Rural Utilities Cooperative Finance Corp. which put up $2 million and financed the acquisition.

Since its launch 12 years ago, the nonprofit Kauai Island Utility Cooperative has returned $30 million to its members, who are its customers, money that is left at the end of the year after expenses are met. And it has built up more than $80 million in equity, the members' ownership stake.

"Main thing is, we don't have off-island owners that the profits go out to, like an investor-owned utility," Esaki told a forum in Hilo last month. "All of the profits, called margins in this business, stay on the island."

The co-op is guided by a board elected by its 33,000 ratepayers, who each get one vote. It has aggressively pursued solar power and focused on rate stability.

Residential electricity cost 34.1 cents per kilowatt-hour on Kauai in January, compared with 35.9 cents on Hawaii island, 35.1 cents on Maui and 29.5 cents on Oahu, where there are economies of scale.

Kauai's residential electricity rates fell by 1.6 percent from 2008 to 2013 while Hawaiian Electric Co.'s rose by more than 21 percent, according to KIUC, which crunched data from the Public Utilities Commission.